Energy meter price cap will cut bills by £300m a year, market regulator says

Updated

Four million households on pre-payment meters are to benefit from a temporary price cap which will reduce bills by around £300 million a year, the Competition and Markets Authority (CMA) said.

In its final report on a two-year investigation into the energy sector, the CMA also said there would be an Ofgem-controlled database of consumers who had not switched recently to allow them to be contacted by other suppliers for the best deal.

The CMA warned that 70% of people were on the more expensive "default" standard variable tariff, costing consumers £1.4 billion more than a competitive market.

The figure has been revised down from the £1.7 billion overpayment the CMA claimed when it published provisional plans in March.

The competition watchdog said suppliers would be ordered to give Ofgem details of all customers who have been on their default tariff for more than three years, which will go onto a secure database.

This will allow rival suppliers to contact people by letter and offer cheaper and easy-to-access deals based on their actual energy usage, the CMA said, though customers can opt out if they want.

The price cap for households on pre-payment meters is being introduced because the cheapest tariffs for those customers are currently £260 to £320 more expensive than for people paying by direct debit.

It will remain in place until the introduction of smart meters which will allow customers to access better deals.

Roger Witcomb, chairman of the energy market investigation, said: "Competition is working well for some customers in this market - but nowhere near enough of them.

"Our measures will help more customers get a better deal and put in place a modernised energy market equipped for the future.

"With far too many customers paying hundreds of pounds more than they need to, they will be alerted to the better value deals that are out there and it will be easier for them to identify a good deal and switch to it," he said.

"For those customers on prepayment meters, whose options to switch are far more limited, we'll cap prices until the time that they too can benefit from competition."



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